Louboutin v Amazon: direct liability for online platforms where third parties advertise counterfeit goods?

The Court of Justice of the European Union ("CJEU") has ruled that Amazon could be held liable for trade mark infringement in relation to advertisements for 'fake' Christian Louboutin shoes placed on its website by a third party.

This preliminary ruling, a departure from previous case law and the Advocate General's opinion in the case, is good news for brand owners (particularly for luxury products) and may cause online platforms, offering both their own and third party products for sale, to rethink their website design.

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What was the issue?

Fake, red-soled shoes were being sold by third party vendors on Amazon's platform, allegedly infringing Louboutin's red sole registered EU trade mark. While Amazon was not selling the counterfeit products, they were involved in the distribution, storage and advertising of those goods. Louboutin brought infringement actions against Amazon in Belgium and Luxembourg for the alleged use by Amazon of signs identical to Louboutin's registered EU trade mark for the sale of identical goods without Louboutin's consent.

Louboutin initiated these proceedings to obtain recognition of Amazon’s responsibility for the offering for sale of counterfeit products on its platforms by third parties.

The case was referred by the Belgian and Luxembourg courts to the CJEU for guidance on whether Amazon could be held directly liable (under Article 9(2)(a) of Regulation 2017/1001) for "using" the Louboutin trade mark if a third party seller places adverts for counterfeit goods on Amazon's platform, particularly in circumstances where those goods were offered for sale alongside Amazon's own products and the shipping and handling was undertaken by Amazon (i.e. a "hybrid" business model).

What was the position before this Louboutin ruling?

Previously, the Belgian and Luxembourg courts had referred the matter to the Advocate General of the CJEU (AG) who delivered his opinion in June 2022. He considered previous decisions relating to online intermediaries' liability for trade mark infringement, Google France C236/08-C239-08), L'Oreal (C-324/09) and another involving Amazon's storage services, Coty Germany (C-567/18). In those earlier cases, the court found that there was no direct liability on the part of the online intermediaries for trade mark infringement in respect of content/products offered by third parties.

What was the opinion of the AG?

The Advocate General's opinion was that "an online intermediary cannot be held directly liable for infringements of the rights of trade mark owners taking place on its platform as a result of commercial offerings by third parties". His opinion therefore aligned with previous decisions.

Referring to the judgment in Google France, the AG noted that the key consideration was whether the platform owner, in this case Amazon, used a sign "in the context of its own commercial communication". That condition was met where an average consumer (a reasonably well-informed and reasonably observant internet user) made a specific link between the platform owner and the sign. The AG observed that, even though Amazon’s advertisements and those of third-party sellers were presented next to each other and included the Amazon logo, it did not follow that an average consumer would perceive the signs displayed on the advertisements of third-party sellers as an integral part of Amazon’s commercial communication, particularly as the advertisements always specified whether the goods were sold by third-party sellers or sold directly by Amazon.

What did the CJEU conclude?

In its ruling on 22 December 2022, the CJEU concluded that an operator of an online marketplace, which integrates its own sales platform and the sale of third party goods, can be held liable for third party advertisements that infringe a third party's trade mark if the average consumer would be confused as to the origin of the advert (i.e. if a reasonably informed and observant user forms a link between the services provided by the marketplace operator and the trade mark). Departing from the AG's earlier opinion, the Court noted that where that marketplace operator uses a uniform method to present both products that it is selling and those that third parties are selling, all under the operator's logo, this may make it difficult for consumers clearly to distinguish the origin of each advert and source of the infringing goods. In these circumstances, it may give the impression that the marketplace operator is marketing infringing products itself, thereby "using" the registered trade mark.

        
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        Factors likely to demonstrate a link between a marketplace operator and a trade mark:
    
Using a uniform method of presenting products offered on the platform which makes it indistinguishable as to whether a product was being sold by a third party or the marketplace operator;
Displaying advertisements for the marketplace operator's own products at the same time as third party products;
Displaying the marketplace operator's own logo on distribution materials, even if the product being distributed was a third party product; and
Provision of additional services to a third party seller, such as storage, dispatching and advertising.

So, what does this mean for businesses?

The CJEU's ruling is not a finding of infringement by Amazon; that decision will be passed back to the national courts in Belgium and Luxembourg for final judgment.

It nevertheless leaves operators of online marketplaces using a hybrid model, such as Amazon, more vulnerable to direct liability for third parties selling counterfeit products on their sites.

Hybrid business model

If a platform is solely used for third parties sales (such as eBay), and does not mingle its own offerings with those of the third party vendors, there is no change to the existing position as a result of this ruling as the platform operator does not face the same risk of direct liability for a third party's counterfeit products.

It also makes it easier for brand owners to bring claims against large operators, such as Amazon, for infringement rather than bringing a claim against individual counterfeiters (who can be more difficult to track down and whose pockets may not be so deep). Brand owners should therefore take comfort from the CJEU's preliminary judgment.

Platforms using hybrid models, such as Amazon, may wish to rethink their website designs to ensure that products they are selling themselves are clearly distinguishable from third party products, so that consumers can identify the origin of adverts and the party actually selling the goods.

And what's the position in the UK?

This decision is not binding on the courts in the UK.

The UK has seen some important developments in 2022 (again involving Amazon) concerning the liability of online platforms for trade mark infringement. In May last year, the Court of Appeal found in Lifestyle Equities v Amazon that Amazon.com’s advertisements, offers for sale and sales of certain US branded goods to UK and EU customers amounted to trade mark "use" in the UK and the EU and infringed Lifestyle’s UK and EU trade marks. (Indeed, in respect of actual sales of products to UK and EU customers, it was unnecessary to show that there were adverts 'targeting' UK and EU consumers). Amazon is appealing that decision.

How we can help

The Commercial, IP & Technology team at Travers Smith has considerable expertise and experience in e-commerce, intellectual property and advising online retailers and brand owners. Please feel free to get in touch.

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